FED STUDY: QE Hardly Does Anything

You won’t believe this, but apparently QE doesn’t do much for the economy. At least according to the San Francisco Fed:

“Asset purchase programs like QE2 appear to have, at best, moderate effects on economic growth and inflation. Research suggests that the key reason these effects are limited is that bond market segmentation is small. Moreover, the magnitude of LSAP effects depends greatly on expectations for interest rate policy, but those effects are weaker and more uncertain than conventional interest rate policy. This suggests that communication about the beginning of federal funds rate increases will have stronger effects than guidance about the end of asset purchases.”

Some of us wrote pieces like this years ago. At least some Fed researchers are coming around to this view. Better late than never, right? Sadly, I doubt this paper will change much with regards to the thinking on QE.